Monte Carlo Simulation
Definition
Monte Carlo simulation runs thousands of randomized sequences of your historical trades to estimate the probability distribution of outcomes, including worst-case drawdowns and ruin scenarios.
Monte Carlo simulation is one of the most powerful risk assessment tools for traders. It takes your actual trade results and randomly reorders them thousands of times. This shows you not just what happened in the actual sequence, but what could have happened with different ordering — revealing the range of possible outcomes.
For prop traders, Monte Carlo simulation answers critical questions: What's the probability of hitting the profit target before breaching drawdown limits? What's the worst-case drawdown across all simulated sequences? How likely is it that I fail the challenge even with a profitable strategy? These probabilistic answers are far more useful than single-path historical results.
PropJournal's Monte Carlo tool uses your actual trade data to simulate thousands of challenge attempts, giving you a statistical confidence level for passing your specific prop firm's evaluation. This helps you make informed decisions about position sizing and whether your strategy is suitable for a particular firm's rules.
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